A March End for Fed MBS Buying Program Not Set in Stone

The Federal Reserve intends to end its $1.25 trillion MBS buying program at the end of March, but if the problems resurface, the program will be restarted.

At this week’s American Securitization Forum’s gathering, an industry poll found that conference participants felt that the imminent end of the Federal Reserve’s program for buying RMBS would have a bigger impact on the market than the discontinuation of Term ABS Loan Facility or TALF in March for new-issue deals and June for legacy transactions.

However, market analysts still believe that the Fed would only pull out if the market could handle its absence.

Jesse Litvak, a mortgage securities trader at Jefferies, is among those in the industry who have long since said that the Fed would be at the ready to “turn the switch back on” the program.

New York Federal Reserve President William Dudley today has reinforced this industry sentiment and left the door open to the central bank buying agency MBS after its purchase program ends in March, according to an Associated Press interview published on Thursday.

Dudley said of the economy, "if there's a sharp turn in the road," the Fed will adjust its buying plan. "Nothing is on automatic pilot," according to the AP story.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.